Yes, Apple is a Buy!

Rational investors struggle in the face of panic selling

I have written about this often — perhaps too often — but traders can drive otherwise rational investors out of a stock, or the entire market.

Apple (NASDAQ:AAPL) is now trading just above $500 after briefly sitting below that number on Tuesday, still up considerably from below $390 a year ago. The stock sells at a large discount to the market, roughly 11 times earnings compared to more than 14 times earnings. The company will grow at least 20%, probably closer to 30% in the next 12 months, has almost $150 billion in cash and equivalents and has margins two to five times its competitors.

Yes, I think it is a buy.

The larger issue is the impact of traders moving the stock to and fro — and other good stocks as well. The gold miners did not run nearly as fast as the price of gold. They are trading at a discount to their historical prices with gold, and the leaders, such as Barrick Gold (NYSE:ABX) and Newmont Mining (NYSE:NEM), are terrific companies.

I am in Europe right now, in Italy. The economy is bad and getting weaker, and that means central bankers are going to keep pouring on liquidity. Greece will exit the euro this year or next; liquidity plus this uncertainty will push gold back into an upward path and there is more possible return in the miners than in the ETF for gold, the (NYSE:GLD).

Gloom in the eurozone

The mood here in Rome is gloomy. People are not thinking about markets or central bankers or gold but jobs and business prospects in 2013. They are not good — too many stores are closed or closing. Even the luxury goods shops are empty, tourism is way off and no one is speaking of anything positive happening anytime soon.

Italy is the critical member of the euro — it should not have joined, it should leave the eurozone to make its exports and tourism far more competitive, and it funds most of its debt internally. If the economy does not show signs of improvement by year end, there will be a great debate about the eurozone.

That is next year. This year the pundits on television are telling investors that European markets are cheap and undervalued.

Nope, the worst of the recession is yet to come. European companies and American multinationals with too much exposure to Europe are going to take a hit. Ignore the pundits. There is a way to play Europe: come and visit. My hotel is cheaper than my last visit to check on the recession two years ago.